Silvergate bank is now serving more than 483 cryptocurrency startups in United States by providing them with banking services within a legal framework of traditional banking, and is an example of a go-to bank for many crypto fintech startups at a time when many are struggling to access banking services.
Many legacy banks view cryptocurrency dealings as high risk for them and are unable to commit to helping them solve these challenges. Although that’s partly due to regulatory challenges, the Silvergate bank leads the way to show many others how they could work and cooperate with these types of customers.
Currently, the bank is a strategic institution for institutional cryptocurrency investors, over-the-counter (OTC) trading desks, and for big cryptocurrency exchanges including Kraken, Coinbase, Gemini and bitFlyer. The bank also serves a host of international clients in the digital currency space. The clients can deposit, trade and withdraw on 24/7 basis.
Silvergate bank offers APIs and real-time USD settlement solution between counterparties called Silvergate Exchange Network to serve the crypto startups. Their deep understanding of regulatory compliance for crypto industry enables them to work with leaders within compliance. The Silvergate Exchange Network not only enables real-time transfers and availability of funds for investors using APIs, but also transfer of banks on a peer-to-peer method. In other words, this network allows cryptocurrency customers to easily transfer balances between them.
The SEN platform facilitates movement of fiat between exchanges and bank accounts in real-time on a 24/7 basis instead of the several days and hours legacy solutions usually take. It hosts than 60% of the bank’s digital currency customers including the 5 largest U.S. domiciled cryptocurrency exchanges. The bank worked with blockchain analysis firms such as Elliptic to help analyze blockchain transactions, and the result was a tool that would make banks comfortable working with cryptocurrency firms.
Before the coming of the new tool, the bank had to rely on the word of mouth from crypto clients and the promise that they were working or doing the best they can. The tool not only helps them to have in-depth visibility of risks associated with handling crypto transactions and in risk mitigation, but to also vet them and comply with know-your-customer (KYC), anti-money laundering (AML) and Bank Secrecy Act (BSA) requirements.
But tools aside, the regulated bank has been working closely with crypto businesses and startups to help them to evolve within a regulatory environment. Lane believes that it is integral to work with the law. The bank learnt from its history: back in 2014 after talking with crypto exchanges about the problems they were facing and how the bank could help, Silverbank knew it first needed the approval of California State Banking Department and Federal Reserve Bank of San Francisco and it worked with them for approval.
Currently banking on fiat-backed stable coins, considering international expansion and exploring a crypto-custody business, requires its clients to use external auditors for assets like dollar-begged stablecoins. This ensures that fiat deposits match with exchange records. This is in addition to working with startups that have professionals with legal expertise from the traditional financial world according to CEO of Silvergate Bank Alan Lane.
His bank has come this far as a result of the believe and interest in cryptocurrency him and the bank have had in history. He bought his first Bitcoin back in 2013 after developing interest in it as a student at San Diego State University. His bank — then only a small community lender — made a decision to take the first crypto exchange as a client. Many financial advisors would then have considered it as a bad and risky move. And it is still held as the same today by many. However, since then, the bank started working with crypto clients as a way to maintain its accounts.
Moving forward, the bank wants to use its 30 years experience to grow and scale by serving clients in the digital currency industry.